Kentucky Cottage Industries v. Glenn

• Decision Date: 23 June 1941
• Docket Number: No. 89.,89.
• Citation: 39 F. Supp. 642
• Parties: KENTUCKY COTTAGE INDUSTRIES, Inc., v. GLENN, Collector of Internal Revenue.
• Court: U.S. District Court — Western District of Kentucky

39 F. Supp. 642

KENTUCKY COTTAGE INDUSTRIES, Inc., v. GLENN, Collector of Internal Revenue.

No. 89.

District Court, W. D. Kentucky.

June 23, 1941.

Allen P. Dodd, and Dodd & Dodd, all of Louisville, Ky., for plaintiff.

Eli H. Brown, III, U. S. Atty., of Louisville, Ky., for defendants.

MILLER, District Judge.

The plaintiff brought this action to recover from the defendant Glenn, Collector of Internal Revenue, the sum of $1,271.60 with interest which it claims it paid under protest as Social Security taxes in December, 1938, and January, 1939. It contends that it is not an employer within the provisions of Sections 804 and 901 of the Act, Sections 1004 and 1101, Title 42 U.S. C.A., under which provisions the tax in question was assessed. It is agreed between the parties that the preliminary steps necessary to be taken in order to properly maintain this action were taken by the plaintiff.

Findings of Fact.

The plaintiff Kentucky Cottage Industries, Inc., is a Kentucky corporation with its principal office and place of business at Hardinsburg, Kentucky. At the times under consideration it was engaged in the business of making comforters, quilts, and similar articles which were made by hand by various individuals engaged by the plaintiff. Plaintiff's method of production of the articles which it sold was as follows: A particular design for an article was determined upon by the plaintiff which design was stamped upon the material to be used and specifications dealing with the nature of the work to be performed were decided upon. The plaintiff then turned over to an individual who was willing to do the work the design, specifications and the material from which the finished article was to be made. A written contract was entered into between the plaintiff and the worker which provided as follows:

"Hardinsburg, Kentucky ____ 193_

"Work Contract

"This Agreement, made and entered into, in duplicate, on the above written day between ________, herein called First Party, and Kentucky Cottage Industries, Incorporated, a Kentucky corporation, herein called Second Party.

"Witnesseth, That: —

"First Party herewith acknowledges that she has this day received from Second Party the following materials:

"First Party agrees to work same according to specifications given by Second Party, which specifications are attached hereto and made a part hereof as fully and to the same extent as if copied herein at length, and upon the completion of the work required in said specifications, and not later than ____ days from the date hereof, to return said materials to Second Party.

"Second Party agrees that said work may be done at such times within the period hereinabove allowed and at such places as are agreeable to First Party, and further that First Party may do said work either personally or by agents of her own selection.

"Upon First Party's completing the specified work upon said materials to the satisfaction of Second Party and re-delivering to Second Party the completed work and all unused portions of said materials Second Party agrees to pay First Party for said work a total price of $____.

"From the time of the delivery of said materials by Second Party to First Party, and until the re-delivery of said materials to Second Party, First Party shall be liable for the loss or ruin of, or damage or injury to, said materials.

"In Testimony Whereof, witness the signatures of the parties hereunto affixed the day and year first hereinabove written.

"________ First Party "Kentucky Cottage Industries Incorporated "by ________ Second Party. "Original."

The workers were wives and daughters of farmers living in the same or adjoining counties, who had time available for the work when not occupied with their regular farm duties. The material would then be taken by the worker to the worker's home where the work would be done by the worker or by such other people as the worker would secure to assist her, and returned to the plaintiff within the specified time. The plaintiff did not furnish either a place to work in or the tools with which to do the work. The work involved was skilled. The worker was not required to work exclusively for the plaintiff, and as a matter of fact would often work for one or more of the several competitors of the plaintiff in the same part of the state. During the busy season work would be let out by the plaintiff to as many as five hundred different workers. The plaintiff exercised no control over the working hours, working conditions or details of the work while it was being done at the worker's home, but did have the right of acceptance or rejection when the finished product was returned. Each piece of work was a separate matter of business; there was no obligation on the part of the plaintiff to reemploy the same worker on another piece of work and there was no obligation upon the worker to return for work after one piece of work had been completed. As a matter of fact, it usually happened that the same worker would continue with numerous successive contracts.

Conclusions of Law.

Section 804 of the Social Security Act of August 14, 1935, Section 1004, Title 42 U.S.C.A., provides that every employer shall pay an excise tax with respect to having individuals in his employ, equal to a designated percentage of the wages paid by the employer after December 31, 1936, with respect to employment after such date. Section 811 of the Act, 42 U.S.C.A. § 1011, provides that the term "employment" means any service, of whatever nature, performed within the United States by an employee for his employer, excepting certain classes of employment which are exempt and which are not applicable to the present facts.

Sections 901 and 907 of the Social Security Act (Sections 1101 and 1107, Title 42 U.S.C.A., provide that every employer of eight or more persons shall for the purpose of unemployment compensation on and after January 1, 1936, pay for each calendar year an excise tax, with respect to having individuals in his employ, equal to a designated percentage of the total wages payable by him with respect to employment during such calendar year; and that the term "employment" means any service, of whatever nature, performed within the United States by an employee for his...